It has been a bumper year for investment returns with the S&P 500, FTSE 100 and other established stock markets trading at record highs or thereabout.

This is despite a raft of political uncertainty stemming from Donald Trump's victory in the US presidential race and the threat of electoral successes for far-right and nationalist parties in Europe.

The so-called 'fear index' suggests investors were not worried about all the hubbub. The VIX, shorthand for the CBOE Volatility Index, has traded at historically low levels for most of this year and remains a fraction above the lowest level it has seen since it was introduced in 1993.

But where exactly have investors found their greatest successes over the past 12 months? We take a look at the 10 best and worst performing sectors and investment funds.

After taking a battering in the immediate aftermath of the EU referendum result, the IA UK Smaller Companies sector experienced a return to form over the past 12 months

But before you read the list, be aware that past performance is not an indicator of future results, so think twice before piling your cash into investments boasting bumper performance because their fortunes could come crashing down.

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Top sectors

Let's start with the 10 best sectors. Racing its way to the top of the table is the IA (Investment Association) UK Smaller Companies sector.

After taking a battering in the immediate aftermath of the EU referendum result, funds in the sector experienced a return to form over the past 12 months - generating an average return of 34.34 per cent.

Jason Hollands, managing director of broker Bestinvest, said Britain's smaller enterprises were buffeted by predictions of imminent doom and gloom following the contentious vote as many of these companies are more domestic in nature than the big, global, blue chips found in the FTSE 100.

He added: 'So there was significant indiscriminate selling as fund managers and other investors rotated out of smaller companies into larger businesses with international earnings.

Top 10 IA sectors

Sector

Total return %

IA UK Smaller Companies

34.34

IA China/Greater China

32.93

IA Technology & Telecommunications

31.43

IA European Smaller Companies

29.47

IA Europe Excluding UK

23.97

IA Asia Pacific Excluding Japan

23.96

IA North American Smaller Companies

23.01

IA Global Emerging Markets

22.69

IA Europe Including UK

22.44

IA Asia Pacific Including Japan

21.71

NB: Based over a 12-month period to 6 November. Source: FE Analytics

'Subsequently, however, smaller companies have rallied strongly off this weak sentiment as the economy has proven more resilient than many expected and some investors have been prepared to selectively dip their toes back in the small-cap pond again after a period when they were undoubtedly oversold.'

Not far behind in second place is the IA China/Greater China sector, which returned 32.93 per cent. At one stage earlier in the year, the sector looked under threat of US- led trade sanctions over China's actions - or there lack of - against the inflammatory war rhetoric made by its neighbour North Korea.

These concerns have since dissipated, and, as the world's largest manufacturing country, China has been able to profit from a wider pick up in global growth.

That said, concerns about the build-up of debt in China have not gone away and Chinese authorities have been signalling they will take some measures to reel it in, which could stymie economic activity as early as next year, according to Hollands.

The IA Technology and Telecommunications sector completes the top three, boasting a return of 31.43 per cent. Some 80 per cent of tech funds are invested in the likes of Apple, Amazon, Google's parent Alphabet and other US companies.

However, valuations have been propelled to very high levels, which raises concerns as to whether these now represent a bubble that could burst, according to Hollands.

'This is in part, I believe, a by-product of so much cheap money sloshing around the financial system after years of ultra-low interest rates, which has made investors a little too complacent about risk. With the US now on a cycle of raising interest rates and tightening monetary policy there is an increased risk of the latest tech bubble bursting.

How fast will interest rates rise?

How quickly does the Bank of England think that the base rate will rise after its was lifted for the first time in a decade?

Simon Lambert explains how the Bank laid out its forecast - and outlines the good, the bad and the awkward situations that could affect this, in this excerpt from the This is Money podcast.

Top funds

As its name suggests, the fund invests primarily in shares of small British companies - provided they are not bigger than the largest company in the Numis Smaller Companies Index - for capital growth.

Top 10 IA funds

Fund name

Total return %

Old Mutual UK Smaller Companies Focus R Inc GBP

65.2

Baillie Gifford Greater China B Acc

47.1

Threadneedle UK Smaller Companies Z Inc GBP

46.3

NB China Equity A Acc USD

45.6

TM Cavendish AIM B

45.4

Polar Capital Global Technology I GBP

44.3

Jupiter UK Smaller Companies I Acc

43.9

Marlborough UK Micro Cap Growth P Acc

42.7

Unicorn UK Growth B

42.6

Aubrey Global Conviction A Ret Acc

42.4

NB: Based over a 12-month period to 6 November. Source: FE Analytics

It is managed by Nick Williamson and levies ongoing charges (OCF) of 0.88 per cent.

In second place, boasting returns of 47.1 per cent, is Baillie Gifford Greater China. Managed by Mike Gush and Sophie Earnshaw, the fund selects shares of companies that are either domiciled, incorporated or conduct a significant portion of their operations in one or more of mainland China, Hong Kong or Taiwan for growth. It has an OCF of 0.82 per cent.

The fund invests at least two-thirds of its assets in shares of smaller companies in the UK or companies that have significant operations there. It has an OCF of 0.88 per cent.

Bottom sectors

The worst performing sectors table is littered with bond funds - but this is hardly a surprise.

Both inflation and interest rates are on the up, which erode the value of bonds.

Bottom 10 IA sectors

Sector name

Total return %

IA UK Index Linked Gilts

-1.93

IA Short Term Money Market

0.06

IA Money Market

0.12

IA UK Gilts

0.61

IA Global Bonds

1.27

IA Global Emerging Markets Bond

2.32

IA Targeted Absolute Return

4.19

IA Sterling Corporate Bond

4.71

IA Sterling Strategic Bond

5.40

IA Mixed Investment 0 35% Shares

5.66

IA Property

7.31

NB: Based over a 12-month period to 6 November. Source: FE Analytics

What's more, central banks have begun scaling back on quantitative easing - which has sent bond prices soaring since the financial crisis - to foster monetary policy normalisation.

The IA UK Index Linked Gilts is the worst performer over the past 12 months, with funds in the sector averaging performance of minus 1.80 per cent.

While index linked gilt products are shielded from a rise in inflation, they are open to hikes in interest rates, which drives up yields.

This is bad news for sellers as a fall in price results in a loss of capital and a negative return.

Adrian Lowcock, investment director at the wealth manager Architas, said: '2017 has been a pretty bad year for bonds. The US rate rises and better than expected global economy have been more supportive of equity markets and are not so good for bonds.

'Investors are now favouring equities over bonds and that has been the place to be.'

Bottom 10 IA funds

Fund name

Total return %

MFM Junior Gold P

-35.6

Smith & Williamson Global Gold & Resources B Inc

-25.1

Manek Growth

-18.9

Old Mutual Gold And Silver R Acc GBP

-17.1

Investec Global Gold I Acc GBP

-15.8

CF Ruffer Gold C Acc

-15.7

Old Mutual BlackRock Gold & General U2 Acc GBP

-15.4

BlackRock Gold & General D Acc

-15.3

TM Sanditon UK Select A Acc

-11.3

Threadneedle Aquila Life Overseas TPU

-9.2

NB: Based over a 12-month period to 6 November. Source: FE Analytics

The foot of the performance table is occupied by a number of funds investing in gold.

The worst performer is MFM Junior Gold, which generated a return of minus 35.6 per cent in the past 12 months.

Lowcock said: 'Gold, understandably so as the defensive asset class, fell out favour as investors became more willing to take risk.'

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